The FCA needs sharper teeth says NICK SMITH Labour MP for Blaenau Gwent
The following is part of Citywire New Model Adviser’s Reform the Regulator campaign, MP Nick Smith shares his thoughts on what changes he would like to see at the regulator.
My experience of the FCA over the past five years is one of a regulator that is too slow to react, does not offer adequate support to consumers, and lacks the teeth to properly deal with those who seek to rip off consumers.
British Steel MP Smith…..My dealings with the FCA have revolved around helping steelworkers who were targeted in the British Steel Pension Scheme (BSPS) scandal.
Workers who, like most of us, are not pension savvy and were left adrift when attempting to make very complex financial decisions around their pensions. They were left at the mercy of rogue advisers. It was the perfect environment for pension sharks to swarm on consumers, offering poor advice with big promises.
The FCA failed to recognise the potential for this scandal and was slow to respond as the wrongdoing unfolded. Not nearly enough has been done to hold those responsible to account in the aftermath. Reports from the public accounts committee and the National Audit Office have highlighted this. Steelworkers were treated badly, and the regulators let them down in their hour of need.
The FCA was too focused on what was going on in the City of London and so missed the large-scale rip-offs that were taking place in the kitchens of consumers in Ebbw Vale, Port Talbot, Scunthorpe and other steelmaking communities.
I have not seen anything that indicates this focus has changed. The process for making a complaint is too complicated and the communication with those affected by scams is inadequate.
In regard to the BSPS scandal, only 25% of steelworkers made complaints. This is frustrating given that around 90% of complaints have been upheld.
A large number of steelworkers with likely good cause to complain have been left behind. This is a result of a failure to adequately reach out to those affected and a failure in the system, whereby steelworkers were expected, in the first instance, to complain to the advisers who had been ripping them off.
They felt they had no one to turn to and were left dealing with an alphabet soup of regulators and ombudsmen in what is a very complicated and, at times, overwhelming financial world.
This process should be much more straightforward and there should have been much better communication from the FCA.
We’re going to need a bigger boat.
I spoke in Parliament recently about how I am not convinced the new financial services and markets bill is strong enough to protect consumers from being ripped off in this way again.
I am glad the Treasury will have increased powers to direct the FCA to make, review and enforce new rules as and when the need arises, but we need a fit-for-purpose FCA that defends its consumers at the outset. It needs to hold bad actors to account from the get-go.
The FCA mentions having handed out £1.3m in fines to advisers found to have given poor advice, but this actually refers to just one case. There have been another 30 investigations against advice firms in the pipeline for quite some time.
Strong, swift action against rogue advisers would be a deterrent to other bad actors.
These sorts of cases warrant not just financial penalties and industry bans but also criminal prosecution. The FCA needs sharper teeth.
Consumer protection should be better embedded in the financial services bill as a key accountability of the regulator. We need better focus on consumer protection. The FCA’s enforcement powers need boosting and should be reviewed. The limp enforcement we currently have is not good enough.
Finally, the FCA consumer panel needs the firepower necessary for challenging the culture at the FCA. To ensure consumers have confidence in the regulator, it must have the power to act accordingly and foster a culture of putting the consumer first.
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